Aircraft financing next big frontier for HK

Aircraft leasing will be a very hot topic in the financial sector in 2015. And that will offer Hong Kong companies and financial institutions a rare opportunity to tap into the lucrative sector.

In the past, aviation and aircraft financing have long been dominated by Western players. However, the situation could change as China has outlined some policies to drive the growth of aircraft leasing market.

The State Council, China’s cabinet, unveiled “Opinions on accelerating the development of the aircraft leasing industry” in December last year. The circular has provided a framework to map out the future development of the industry under a “three-step” strategy approach.

The three steps include creating a conductive political environment by the end of 2015, nurturing leading enterprises by 2020 and building an aircraft leasing industry cluster by 2030.

The aircraft leasing industry is set to take off in the next two decades. China has an enormous market, strong government support and abundant capital, which is luring more mainland companies — particularly financial firms — to tap into the sector.

And Hong Kong has a special edge in talents pool, including international professionals, lawyers, accountants who are necessary for China to foster the aircraft financing sector.

Aircraft leasing could become a perfect way to push the renminbi internationalization. In the past, Chinese needed to manufacture and export tens of millions of pairs of shoes, for example, to save enough foreign exchange for an aircraft.

But in recent years, the country has made great strides in making its own aircraft. The nation’s first indigenously designed airliner, the Comac ARJ21-700 regional jet, has been granted a type certificate on December 30. It’s a great milestone for the country’s aircraft manufacturing sector and also offers a new option for international allocation of aircraft assets.

Moreover, financial institutions could offer their aircraft sales and leasing business in renminbi pricing, with some incentives. That may become a viable way for the Chinese currency to be adopted by global industry players. Hong Kong, the major offshore renminbi center, has an obvious advantage in offering such products.

The Hong Kong government has set out an ambitious plan to develop the territory into an aircraft leasing hub. The move is set to attract more financial institutions to join the sector next year.

Currently, the former British colony has very limited presence in either aviation or aircraft financing. It has lagged far behind Singapore. This means the market potential is enormous.

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